Friday, June 27, 2008

Separation of Powers

I have started a new blog called "What De Rass?" This is where you'll be able to find my personal ramblings. All finance oriented chatter will stay here, but I'll move the bulk of my non-finance related postings over there. Things seem cleaner that way.

Those of you who come here probably don't give a damn about my life or what goes on inside my head beyond the conversations about finance, money and alpha (when they break out). Thats all good and fine, and this is the place that you'll stay. For those of you who harbor any interest in me beyond finance and my take on it, feel free to check out "What De Rass?" and even let me know what you think.

Have a good day, all!

Wednesday, June 25, 2008

Silver Lining

It looks like Mexico might have some medication for the real estate woes in Texas.

You have to admit, that's pretty funny. Mexico, of all basket case economies, has enough liquidity flowing through its veins to stanch the bleeding here. There are so many things racing through my head -- humor among them -- as I think about this.

Sunday, June 22, 2008

What I Want... a short play on social networking. How many fuggin' social networking sites do we need? I know I sure don't need that many, and I probably need more than the average human. (Not as many as Kedrosky, but more than average. THAT dude needs his own personal social network.)

I wish there were a nice index I could short, but none of these fuggin' sites is public (and most probably have no chance of ever being public). In fact, fugg a short. Just buy puts on the index. I need a derivative contract.

Hi5? Facebook? LinkedIn? Friendster? Ok, ok, ok. I'm good. I don't need Multiply or MyYearBook or whatever the hell other social networks are lurking out there. Fuggggg man, just leave it alone already!

One of my students asked me about his idea for a social network the other day. I went on a rant about the business, basically telling him that he'd be better off doing it as a hobby unless he had a clear business case and heartless, soulless dedication to that objective. (As Gekko said, if you need a friend, get a dog.) I sure hope he doesn't go through with it. Talk about a waste of talent and time.

Stop with the social networks, please, for the love of God and all that holy!

Monday, June 16, 2008

Does Not Compute

Something about Felix's argument doesn't compute, but my brain is a bit too cloudy to take this on right now. I need some sleep.

Yes, credit enhancement has generally been the name of the game with muni issuers and monolines. The issuers were trying to get their issuance costs down (e.g. their yields), knowing full well that the primary buyers of their product were likely not going to spend a lot of time doing credit analysis. Even doing 1 issue would be problematic for a small investor, never mind the universe of muni credits in the marketplace. Guys like Tom make a lot of money (and spend a lot of time) doing that research. People like me, however? Not so much.

So what am I missing here? Yes, credit enhancement in an era of diminished trust in the ratings agencies is probably absurd. However, you have to play to your audience. The rating agency problem will, hopefully, start getting sorted out with new entrants to the market. I don't see this world changing drastically.

Of course its nuts that munis, with their historical default rates, were not being compared evenly with corporate credits. However, I think your state treasurer probably was working with a small budget, and any way to shave a few hundred thousand in coupon payments annually was (and is) significant. All of those costs (and savings) flow directly to the bottom line.

In the longer run, the market will likely morph. Higher quality credits will probably go without insurance. Lower quality issues will probably still seek it out. I doubt the market will disappear, but shrinkage seems highly likely to me. For these issuers, making those costs evaporate is probably the key reason for the demand for insurance. Now, I may be missing something from my limited vantage point. Please, someone, clue me in if I have missed something. Basically, I think Felix is being a bit too cynical on this one. Ratings arbitrage occurs, sure, but I think the primary motivator for many of these treasurers is keeping their costs low. For a relatively small outlay (especially for larger issuers), they could get that, with the higher rating being gravy (an effect rather than a cause).

Does that make sense to anyone other than me? I hope it does. Maybe I'll expound on this after I get some rest.

Until then, dear - don't leave home without it!

Inflation is Fuggin Bad when...

...the Japanese start spending.

Need I say more?

Sunday, June 15, 2008

It's Official!

My $20,000 savings goal has officially been accomplished! The latest account balance is $20,275.82 after my latest direct deposit (at a rate of $250 every pay period) and $51.65 in interest.

Gawd, saving money is addictive!

I'm preparing my next credit card payment for this week, and it will be substantially bigger than usual. I love progress! I'm happy. (I'd be happy without this, but there are just 2 more things to be be happy about.)

Until next time, cheers!

Thursday, June 12, 2008

Goal Shifting

While reading over my 2008 goals last night, I came to the realization that 2 of my goals (1 each of the regular and stretch) are no longer goals of mine. I just no longer desire to work on them. So, in order to have my environment reflect my reality, I am updating my 2008 goals appropriately.

Regular Goals --

Personal: Learn to snowboard with enough proficiency that I can tackle a green trail by 31 Dec 2008. (Success)
Personal: Accumulate $20,000 in emergency funds by 31 Dec 2008. (Success)
Personal: Achieve $150,000 in net worth by 31 Dec 2008.
Personal: Save $15,000 for a house down payment by 31 Dec 2008.
Personal: To find and accept an offer on a new, rewarding and fulfilling job by 29 Feb 2008.
Business: Unwind my real estate investing partnership by 30 Jun 2008, including all asset sales.
Business: Hand off my consulting customers to responsible, attentive, competent person with high integrity by 30 Apr 2008.
Business: To ship a prototype of our application running on Windows Mobile and the iPhone by 30 Sep 2008.

Stretch Goals --

Personal: Read 50 books by 31 Dec 2008.
Personal: Accumulate $30,000 in emergency funds by 31 Dec 2008.
Business: To have a beta release of our application running on Windows Mobile and the iPhone by 31 Dec 2008.

As you can see, successful goal completions are identified in blue text. My mobile software idea is a much lower priority for me right now, so I have struck through the 2 goals related to it. However, I do have a new fixation, software-wise, and I plan to work on that opportunity more and the mobile device software less.

That's all for now. Peace!

Monday's 2 Year Treasury Yield Spike

Bespoke Investment Group has a post about Monday's huge jump in 2 year Treasury yields. Using this as an indicator for a trade is a non-starter, at least against the overall market. The returns over the time periods researched are too small to justify the risk. It would be interesting to see the returns for various industry sectors. Also, it would be cool to see how long it takes each sector AND the index to breakdown after the jump.


Tuesday, June 10, 2008

See, I Didn't Forget You!

Wow, it really has been a long time since I last posted. It seems like just yesterday that I had posted 5 times in a single afternoon. Ahhh, the power of focus!

I have truly been remiss these last 2 weeks. I apologize again. However, its spring! I've been working to maximize my fun factor this summer. DC Carnival is coming up, and some really good parties with it. I plan to hit a bunch of amusement parks and ride roller coasters until I can't stand. I'm going to hang out with my second cousin and his family who I have ignored for years even though they live a short distance from me. Projekt Revolution is also coming to town a short time after my birthday, and since I missed Linkin Park earlier this year, I will not miss this! Finally, I plan to save enough dough to make it back to Trinidad for Carnival next year!

Anyway, I'll quickly go over the latest. Look for some posts in the near future which examine some of these at length.

On the real estate partnership front, it looks like we have an offer for one of our houses. I couldn't be happier about that, if it keeps me from having to liquidate my investment account to put money into the company. We'll see. The guy should be e-mailing over the contract later today.

By the end of this week, my $20,000 savings goal will be accomplished. I'm now thinking of other ways to increase my savings, and this promotion that JLP mentions over on his blog sounds cool. I might just enter it just because. As for saving, I think I've mentioned that I Direct Deposit funds into my savings account, about $150 per paycheck now. That's only been reduced so I can focus on paying down my credit card (and start getting my points).

Anyway, I do play those savings games with myself. The ones I've played for as long as I can recall involve saving any bills of a certain denomination that land in my wallet. For a long time, that was $1 bills. Maybe 18 months ago or so, I upgraded to $5 bills, and I don't see myself going to $10 bills anytime soon. Those fives are pretty hard to keep, but it does reduce the impetus to spend. I think I had $15 in change left over from this past Saturday when I went to the Capital Jazz Festival, and all of it was in fives. Added to the $100 I did not spend, that will be a nice bump when I deposit it later this week. (I took $200 out of the bank for the festival, and the remainder became my spending money for the week.)

I also save change religiously. I started that as a kid. My father would tell, if not force, me to deposit coins into a jar that he kept in his closet. At some point, we would have a father-son bonding session by counting and wrapping all of the change. Since my father wasn't the most emotionally expressive of chaps, this really was a highlight for me, just being able to spend time with him while I got a lesson in saving (unbeknown to me). Now, I do the same thing using an empty Whitman's sampler box. All savings get transferred to my savings account; none of it is ever used for spending. Besides, I build large cushions into my budget, so that I should never go over my monthly spending limit in any category. Anything extra is for saving.

My next plan will be to transfer the delta between my monthly budget limits and my actual spending into my savings account. I've usually just let those amounts sit in my checking account, or spent them without thinking. However, I want to make my saving more active. Passive saving is easy and find and I highly recommend it to all, but I think of how much I haven't saved that I could have if I had started this plan sooner. Oh well, such is life.

I'm also in the market for a new living space. My lease is up at the end of August, and I have found 2 prospective apartments. The cost difference is only $56 between the two, but once is brand new and the other is quite a bit older. Since I do work out almost daily and I relish the convenience of a fitness center on the property, I'm trying to get a feel for how the older place will renovate theirs. $56 per month is not hugely significant, but I am willing to sacrifice that money for convenience and modern equipment. I really want to get back to my workout routine from when I lived in Orange County, CA. Back then, thanks to my man G, I started working out a few times a week. That grew into an obsession, and I'd workout for 90 minutes before work, then 90 minutes in the afternoon before returning to the office to hack until 11 or 12. After doing 2 hours of cardio plus some running or practicing shots on the basketball court, then some light weights EVERY DAY, I made some serious strides in my fitness. It only took 2 months of that routine to show a difference, but I didn't measure my progress since I found out that I absolutely LOVED it just as a personal challenge. Go figure. The kid who rarely exercised growing up (out of fear on his parents' part that he might induce his own death vis-a-vis a massive Sickle Cell crisis) loves exercising.

Anyway, I digress. Continuing on...

So I expect to save between $300 and $400 a month in rent while at the same time reducing my commute distance. How's that for a plan? I'm soooo looking forward to it. Right now, I think I'll take 1/3 of those funds and increase my monthly savings, divide 1/3 over the various categories of my spending plan, and use the remaining 1/3 to pay down my credit card debt that much faster.

As I said, I look forward to espousing on some of these ideas a bit more extensively in the future. I'm also planning to talk a bit more about financial technology, and hopefully I'll be able to rub brains with some of the better bloggers/thinkers on the subject. I definitely see my career turning in that direction. Of course I'll keep you posted on that. There should also be some progress on the investing front, such as getting that option trading sorted out, and formalizing my analysis. I've been rather haphazard about analyzing my trades, doing research, and generally learning more about investing, trading, and finance. That has to come to an end, and I hope you'll join me for the adventure.

So much for quick, eh? Ah well. You know I love you all!

Until next time, y'all...